Flood Insurance
Requirements
The PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). must have flood insurance if any income-producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). or any non-income producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). that support amenities are located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. Zone A or Zone V.
The coverage amount must be 100% of the insurable value of
- the first 2 floors above grade and any ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). below grade, plus
- all Fixtures and Goods located on the first 2 floors above grade and/or below grade (as defined in the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. ).
The deductible amount may not exceed the greater of
- 5% of the insurable value of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). ,
- the applicable maximum amount in Part II, Chapter 5: Property and Liability Insurance, Section 501.02A: Minimum Coverage Amounts, or
- for business income insurance (including rental value insurance), 15 days or equivalent.
If the coverage available under the NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. is not sufficient to meet the requirements set forth above, then the BorrowerBorrowerPerson who is the obligor per the Note. must have excess flood insurance or difference in conditions (DIC) insurance that either
- covers the difference, up to the required coverage amount, or
- if the required coverage amount is not economically feasible, covers an amount that you determine is reasonable, given the exposure.
During the Letter of Map Amendment (LoMA) process only NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. insurance is required. The maximum term for NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. insurance during the LoMA process is 12 months.
If any ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). are reclassified as within an SFHASFHASpecial Flood Hazard Area designated by FEMA. Zone A or Zone V after you deliver the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. , you must require the BorrowerBorrowerPerson who is the obligor per the Note. to obtain compliant flood insurance.
Guidance
Flood insurance is not required if only unimproved portions of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , or non-income producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). that do not support amenities at the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). , are located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. . ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). that support amenities include structures such as clubhouses and pool houses. ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). that do not support amenities are structures such as sheds, pump houses, and storage buildings. Business income insurance is not required for non-income producing ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). .
Keep in mind that conditions may change over time and flood zones may be remapped. In certain cases, you or Fannie Mae may require flood insurance for ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). outside of an SFHASFHASpecial Flood Hazard Area designated by FEMA. Zone A or V, but within an area designated by FEMAFEMAFederal Emergency Management Agency as Zone X or Zone D (for example, if a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). is in an area subject to flooding due to storm water, or within close proximity to an SFHASFHASpecial Flood Hazard Area designated by FEMA. boundary).
When determining whether excess flood insurance or DIC insurance is economically feasible, you may consider a DSCRDSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of: principal, interest, and required Mezzanine Financing or Hard Preferred Equity payments. reduction of 10 or more basis points as a reasonable measure or guide.
Before determining a lesser amount of excess flood insurance or DIC Insurance, or not requiring such coverage, you should have the BorrowerBorrowerPerson who is the obligor per the Note. provide you with at least 3 quotes or declination letters, and determine whether the BorrowerBorrowerPerson who is the obligor per the Note. is attempting to avoid purchasing coverage by applying to companies that do not write flood insurance or give artificially high quotes. If you are provided with a combination of quotes and declinations, quotes should be used to determine feasibility of coverage, and a limit of coverage that is economically feasible should be secured.
An acceptable deductible for DIC insurance is the coverage limit of the underlying NFIPNFIPProgram of flood insurance coverage and floodplain management administered under the National Flood Insurance Act. policy.
You should obtain flood zone determinations from qualified third-party flood-zone determination firms, and exercise care and sound judgment when selecting the firm. You should require the determination firm, and any monitoring company (if different), to
- notify you whenever flood insurance is or becomes required, and
- continue monitoring after any servicing transfer.
You must obtain life-of-loan monitoring for each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). from a third-party flood-zone determination firm.
You are required to complete the most recent version of the Standard Flood Hazard Determination form issued by FEMAFEMAFederal Emergency Management Agency to determine whether any of the ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now or hereafter constructed or placed on the Property, including all fixtures (as defined in the UCC). are located in an SFHASFHASpecial Flood Hazard Area designated by FEMA. . You must keep a completed copy of this form in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. , including a signed copy of the Notice to Borrower of Special Flood Hazard and Federal Assistance (included in the Flood Determination Certificate).
If you permitted a reduction in the amount of excess flood insurance or DIC insurance, your analysis and related documentation supporting the economic feasibility and the amount of the reduction must be
- included in your Servicing FileServicing FileYour file for each Mortgage Loan serviced. , and
- submitted via the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .